Global Economy In Free Fall At Worse Rate Than Beginning of Global Financial Crisis and Great Depression

March 20th, 2020 Comments off

The imposed shutdown of much of the world’s economy, all being done in a frantic effort to contain the rapidly spreading coronavirus, has set the stage for possibly the worst contraction in economic history. JP Morgan has now issued its first projection on the impact of Covid-19 on economic growth. They forecast in Q1 and Q2 of this year combined contraction of negative 14 percent in the United States, and negative 22 % in the Eurozone. This rate of decline exceeds the initial period of the 2008 Global Financial Crisis and 1929 stock market crash that unleashed the Great Depression.

What is unique about the 2020 Global Economic Crisis is that is being initiated by self-imposed demand destruction predicated on a public health emergency. We are entering uncharted territory.

Is President Trump the Herbert Hoover of 2020? Global Economy Collapsing in Freefall – Coronavirus Pandemic Is Now an Economic Catastrophe

March 18th, 2020 Comments off

The imposed shutdown and enforced demand destruction unleashed by sovereigns across the global in a frantic effort to contain the Covid-19 virus has now unleashed an economic contagion of devastating virulence. The underlying weakness in the global economy, mainly unprecedented corporate leveraging, hidden by artificially boosted stock market valuations, are now exposed and vulnerable to an extent that will likely exceed the Global Financial Crisis of 2008 in severity.

All indices of global economic trends – oil prices, equity markets, bond yields – are pointing to a massive global economic contraction, which might very likely become a full blown depression.

The social and political consequences will rival those of the public health emergency. One likely casualty will be President Donald Trump, who until recently seemed headed for reelection on the basis of perceived economic strength.

No longer.

As with Herbert Hoover in 1932, President Trump will have to campaign , not on the basis of the “best economy ever,” but with a depressed economy in freefall collapse, shedding jobs by the millions and with bankruptcies soaring.

The world is about to undergo radical change, unforeseen not even weeks ago.

Wall Street Collapses in Biggest One-Day Decline In History: Are Policymakers Destroying the Global Economy In Order To Save Us?

March 17th, 2020 Comments off

The recession that has followed the outbreak of the coronavirus pandemic is only in its initial stages, and the path is already pointed towards an economic contraction that will likely exceed the Global Financial Crisis of 2008 in severity. Historians will look back on this period in puzzlement as to how this happened. For, unlike the credit freeze that occurred in 2007-08 due to subprime mortgages poisoning the global financial system, in 2020 the entire planet has decided to commit economic suicide in reaction to the COVID-19 pandemic.

The enforced shutdown of the global economy is presented as the only prescription for containing the outbreak of coronavirus, and the Global Economic Crisis now underway is the equivalent of chemotherapy for a cancer patient; toxic to the body, with many negative side effects, but proclaimed as the only way of saving a patient afflicted with terminal cancer.

Historians will look back on this period and render their own judgment if economic suicide was the proper prescription. Be in no doubt, however. The path chosen by policymakers to combat the COVID-19 pandemic is an unprecedented development in world economic history; an enforced, purposefully designed economic recession of staggering proportions.

On March 16 the Dow Jones dropped 2,997 points, equivalent to nearly 13 percent of the DJIA value. This follows days of precedent -making daily declines, interspersed with a few days of record gains. This wild ride of volatility is headed in only one  direction, however; massive losses in equities, with central banks and policymakers uncertain as to how to address the massive wave of economic destruction that has been unleashed, hoping that history will judge them righteous for having chosen what they believe is the only sure path towards containing a virus that, though a clear public health threat, was nowhere near as deadly a pandemic as the Black Death of medieval times.

During the Vietnam War, an American army officer explained to a journalist that he had to order the total destruction of a village in order to save it. Hopefully , the massive wave of economic contraction being imposed globally by policymakers will not have a similar outcome.

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Coronavirus Pandemic Leading To Global Economic Crisis Due To Unprecedented Demand Destruction

March 12th, 2020 Comments off

Now that the World Health Organization has declared Covid-19 a pandemic, it seems inescapable that the world will be plunged into a massive economic crises. The initial steps by central banks to slow the bleeding occurring in global equity markets have been blown away by the scale of the cooronavirus outbreak, as the realization seeps in that the combined health and economic crisis will be of an undetermined but unquestionable prolonged duration.
In 2007 a contagion in the form of subprime mortgages froze the world’s credit markets, leading to the Global Financial Crisis of 2008.

This time it is an actual microbe, a virus, that is the contagion. The Covid-19 pandemic has led both sovereigns and consumers into policies and behaviors leading to massive and accelerating demand destruction. Ironically, this demand destruction will also freeze credit markets, perpetuating the character and scale of the unfolding global economic crisis.
It should be noted that the world is far more polarized than in 2008, and this will exacerbate the scale of the economic and financial collapse that is now upon us. As for the possibility that the cooronavirus pandemic will be of short duration, this is not a likely scenario. It will take at least t one and half to two years to perfect a vaccine, if that is even possible. In a worst case scenario, the health and economic emergency could linger for years.

Economic Shocks Driven By Coronavirus COVID-19 Fears Leading To Global Depression

March 9th, 2020 Comments off

The U.S. Federal Reserve, cut interest rates 50 basis points in a recent bid to calm markets driven by fear from the COVID-19 outbreak. That move, followed by other central banks, has utterly failed, as equity markets collapse and oil prices plummet. Discrete moves by central bankers, lacking synchronized coordination, reflect growing panic by policy makers. They seem to fail in understating that the global fear over the coronavirus pandemic is not paranoia, but built on real consequent of a health menace that is metastasizing globally, leaving economic paralysis and demand destruction in its wake.

One of the most direct economic consequences of COVID-19 is the utter collapse in oil prices. The failure by OPEC to agree on a production cut has led to Saudi Arabia initiating a price war, further demolishing benchmark oil prices. This will have a domino effect, crippling economies worldwide dependent on oil revenue.

A manifestation of the crippling global economic crisis underway is the drop in U.S. Treasury yields, with even 30-year bonds dropping below one percent and 10-year yields sinking.

All these signs of fiscal and monetary panic give growing signs that a massive global economic crisis is now in its early stages, with the possibility it will rival the 2008 global financial crisis in its severity.

Coronavirus Threatens To Unleash Next Global Economic Crisis

March 6th, 2020 Comments off

 

In 2007,just before the last great worldwide financial and economic crisis was unleashed, a book by Nassim Nicholas Taleb was published entitled The Black Swan. It explored how unpredictable and outlier can events can unleash extreme impacts of greave consequence. Though Taleb’s book foretold of the Global Financial Crisis that was about to occur, it is just as prescient regarding the unleashing of the Corona virus and its increasingly devastating impact on the global economy.

Seemingly out of nowhere, Corona virus, specifically the strain identified as Covid-19, began spreading like wildfire towards the end of 2019 in Wuhan, China. Since then, it has been occurring in dozens of countries, leading health authorities worldwide to label Covid-19 a pandemic. And though we are only in the early stages of the outbreak, the global economy is already in dire straits.

Stock markets are plummeting, global supply chains are being disrupted, the travel and tourism and related industries are being devastated, and economic fear is becoming as contagious as Covid-19 spread with virulence.

The economist noted for predicting  the 2007-2008 financial collapse, Nouriel Roubini, otherwise known as “Dr. Doom,” is now predicting massive economic collapse as the Corona virus spreads and intensifies. In his views, any equity recoveries are only temporary and the worst is ahead of us, with stock markets possibly contracting by 40 percent or more. Other elements, which Roubini describes as Whites Swans, such as tension with Iran and the China-U.S. trade war, will further exacerbate the economic consequences of Covid-19.

This is not a mere correction or cyclical recession that is being discussed, but a global economic depression of massive proportions. Central banks are already slashing interest rates to near zero, and other signs of panic are setting in. The next Global Economic Crisis appears to be just ahead, with the world geopolitically far more divided and conflicted than was the case back in 2008.

 

Will Jeremy Corbyn Transform The UK Into A Marxist Economy And A Police State?

September 2nd, 2019 Comments off

When radical left-winger Jeremy Corbyn shocked the UK political establishment by taking over the country’s Labour Party, few thought he would last long as leader of the official opposition in Parliament. Yet, in the snap election called by then-PM Theresa May, he surprised everyone with a strong showing, denying May a majority government. Now, with Brexit creating massive political chaos in the United Kingdom, only the foolhardy would claim that Corbyn has no chance of becoming the nation’s next prime minister.

Corbyn is believed by many to be both a radical, Trotskyite-style Marxist, and an anti-Semite, who has associated with holocaust deniers and visited the graves of Palestinian militants who murdered Israeli athletes at the 1972 Munich Olympics.

But what about Corbyn’s plans for remaking the UK economy? The leading financial publication in the United Kingdom, the Financial Times, has just published an in-depth analysis on what Jeremy Corbyn plans to do to the economy of the United Kingdom, should he become prime minister. The article                                                                                                                                  ( https://www.ft.com/content/e1028dda-ca49-11e9-a1f4-3669401ba76f   ) points out that the Marxist dogma underlying the plans of Corbyn and his Trotskyite advisors would involve massive wealth confiscation and redistribution of the national economy, in essence a program not too dissimilar to what occurred in Venezuela under the late Hugo Chavez ( whose policies Corbyn has publicly praised).

More than 25 years after the fall of the Soviet Union, is European Marxism about to have a rebirth under a future Prime Minister Corbyn? And would Corbyn-style Marxism bring about the same level of tyranny, police state oppression and economic destitution that occurred in the old Soviet-bloc, and is currently afflicting Venezuela?

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Bond Yield Curve Points To Major Economic Recession

August 14th, 2019 Comments off

 

Until now, the last time the U.S. Treasury 10-year bond yield dipped below 2-year bonds was in 2007. That event foretold the 2007-08 global economic and financial crisis. This inverted curve has been uncanny in its predictive ability to foretell a near-time arrival of a major recession. Now, in August 2019, we again have an inverted yield curve.

Investors worldwide know the significance of this development. Stock markets, including the Dow Jones, are plummeting by big figures. Is this an overreaction, or a rational response to impending fiscal and economic danger.

The inverted yield curve should not be viewed in isolation. Rather, it should be seen in the context of the escalating trade war between the world’s two largest economies, the growing risk of a hard Brexit, and economic stagnation in Europe.

The warning chimes are growing louder.

Goldman Sachs Cuts U.S. GDP Growth Forecast As Trade Tension With China Fuels Recession Fears

August 12th, 2019 Comments off

Jan Hatzius, chief economist at leading global investment banker Goldman Sachs, has issued an updated  projection for U.S. Q4 GDP growth; a lackluster 1.8 percent. This reflects a reduction of 20 basis  points from the previous forecast, with Hatzius conceding that the U.S. trade dispute with China has had a negative impact far beyond what was originally assessed by Goldman Sachs.

The latest projection  from Goldman Sachs on trends in the American economy are  indicative of a growing belief that the ongoing and escalating trade war between China and the United Sates has greatly increased fears  that it will trigger a global recession.

It appears that the leadership circles in Beijing are willing to face a major recession that severely afflicts the Chinese economy as a price worth paying to bring down President Trump in the upcoming 2020 U.S. presidential election.  What President Xi  Jinping of China may be ignoring is that a global recession may have unpredictable and disastrous  repercussions for the Chinese economy and the country’s social stability, and jeopardize the future of Beijing’s “One Belt-One Road” initiative.

 

Nouriel Roubini Sees Sino-American Tension Driving Risk of Global Recession in 2020

June 22nd, 2019 Comments off

 

He was dubbed “Dr. Doom”  for his uncanny and highly accurate prediction of the 2008 global financial crisis and global recession. Now, Roubini is again making dire predictions of a catastrophic global economic recession. This time, however, the decisive driver of the meltdown won’t be subprime mortgages but rather the increasingly tense relationship between the two largest economies in the world – America and China.

In an article for Project Syndicate entitled, ” The Coming Sino-American Bust Up,” the noted economist  writes,  “Whether or not US President Donald Trump and his Chinese counterpart, Xi Jinping, agree to another truce at the upcoming G20 summit in Osaka, the Sino-American conflict has already entered a dangerous new phase. Though a negotiated settlement or a managed continuation of the status quo are possible, a sharp escalation is now the most likely scenario.

Roubini sees a global recession occurring as soon as 2020, a predictions that other economists have also prognosticated on. With the previous global economic crisis of 2008 having consumed all the policy perceptions that central  banks and sovereign fiscal stimulus had available for decision makers, the coming global economic recession will find policy makers with  few silver billets remaining. In the meantime, nationalism may replace rational economics in determining the course of the next recession, which Nouriel Roubini believes will be largely determined by the increasingly strife-ridden relationship between the United States and China.

Sheldon Filger-blogger for GlobalEconomicCrisis.com